Far East Capital Newsletter
Inflationary roots are taking hold
8 Jan 2022

In This Issue


Inflationary roots are taking hold

We have seen the usual Xmas/New Year period of reduced volumes over the last three weeks and limited news flow. Share price movements have been more pronounced in some cases but it would be unwise to over-analyse these. The recent key underlying themes have been the rising iron ore price, up 42% from the cycle low, and increasing concerns about oil supply that has led to a stronger oil price. Lithium prices have lifted that sector to new highs while rare earth stocks have been firm. As for the other commodities, interest has been variable. Stock market sentiment continues to be middling following the heavy pullback on Thursday with there being no major revelations.

Management of inflation is all about management of expectations. A primary function of our central banks is to manage these expectations. They will always seek to placate our fears on this front, but it is a bit like the expression referring to the elephant in the room that no-one wants to see. The Central banks will always always play down discussion that could raise our inflationary expectations, taking a line from the notorious Queensland Premier, Joe Bjelke-Petersen, when he would say "don't you worry about that", but it would be naive to just trust governments and their agencies. 

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